v3.26.1
Income Taxes
 6 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income taxes Income taxes
The Company accounts for income taxes under an asset and liability approach. Deferred income taxes comprise the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax reporting purposes, net operating loss carryforwards, and other tax credit carryforwards measured by applying currently enacted tax laws. A valuation allowance is provided when necessary to reduce deferred tax assets to an amount that is more likely than not to be realized.
The Company determines whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. The Company’s policy for interest and penalties related to uncertain tax positions is to recognize interest and penalties, if any, in interest expense and other expense, respectively, in the accompanying unaudited interim consolidated
statements of operations and comprehensive loss. Accrued interest and penalties, if any, are included in accrued expenses in the unaudited interim consolidated balance sheet.
The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and foreign jurisdictions. The U.S. state and foreign jurisdictions have statutes of limitations that generally range from three to five years. The Company’s federal, state and foreign income tax returns are subject to examination unless the statutes of limitations close. The Company is not currently under examination for federal, state, and foreign income tax purposes.
The Company intends to reinvest its undistributed earnings of its foreign operations. Following enactment of the 2017 Tax Cuts and Jobs Act, the repatriation of cash to the United States is generally no longer taxable for federal income tax purposes. However, the repatriation of cash held outside the United States could be subject to applicable foreign withholding taxes and state income taxes. The Company may remit foreign earnings to the United States to the extent it is tax efficient to do so. It does not expect the tax impact from remitting these earnings to be material. The Company adopted this guidance on January 1, 2021 on a prospective basis, and the adoption did not have a material impact to the Company’s unaudited interim consolidated financial statements.
The Company’s effective income tax rate from continuing operations was (6.9)% and 5.8% for the six months ended June 30, 2026 and 2025, respectively. The Company’s effective income tax rate for the six months ended June 30, 2026, is lower than the U.S. federal statutory tax rate due to valuation allowance, which derecognizes deferred tax assets and related future tax benefits, partially offset by the impact of state income taxes, naked credits related to indefinitely lived goodwill, and the Company’s mix of earnings between various taxing jurisdictions. The Company’s effective income tax rate for the six months ended June 30, 2025, was lower than the U.S. federal statutory tax rate primarily due to the impact of state income taxes, non-deductible stock-based compensation, the Company’s mix of earnings between various taxing jurisdictions, partially offset by stock compensation deductions, and federal and state research credits.
Realization of the Company’s deferred tax assets is dependent primarily on the generation of future taxable income. In considering the need for a valuation allowance, the Company considers its historical, as well as future projected, taxable income along with other objectively verifiable evidence. Objectively verifiable evidence includes the Company’s realization of tax attributes, assessment of tax credits, and utilization of net operating loss carryforwards during the year.
Components of our results of operations:
Income Taxes:
As of December 31, 2025, the Company maintained a valuation allowance against all deferred tax assets as Management believed these were not more likely than not to be realized. The Company continues to reassess the valuation allowance quarterly, and if future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly.
On July 4, 2025, legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the U.S. The OBBBA includes significant changes to the U.S. Internal Revenue Code of 1986, as amended, including restoration of immediate deductions of domestic research and experimental expenditures and reinstatement of 100% bonus depreciation for qualifying property. The Company continues to evaluate the impact of the OBBBA on its unaudited interim consolidated financial statements, including the effects on its deferred tax assets and liabilities. The provisions of the OBBBA will allow a deduction for unamortized domestic research and development expenses of approximately $58 million in 2025, which will decrease taxable income and eliminate permanent deductions for Global Intangible Low-Taxed Income and Foreign Derived Intangible Income, causing an increase in the effective tax rate. In addition, there will be an impact in future years due to changes in these two deductions that are not expected to have a material impact to the Company.
The Company’s income tax expenses consists primarily of provision for foreign taxes. As the Company plans to expand the scale and scope of its international business activities, any changes in the United States and foreign taxation of such activities may increase the Company’s overall provision for income taxes in the future.
Results of operations:
The following table displays the benefit from income taxes for the three months ended June 30, 2026 and 2025 (in thousands):
Three Months Ended June 30,
Change
Six Months Ended June 30,
Change
20262025Amount% 20262025Amount%
 Provision for (benefit from) income taxes$515 $(1,192)$1,707 (143)%$2,008 $(1,056)$3,064 (290)%
Income tax expense was $0.5 million for the three months ended June 30, 2026, as compared to an income tax benefit of $1.2 million for the three months ended June 30, 2025. The net increase in expense of $1.7 million for the three months ended June 30, 2026, was primarily due to the domestic valuation allowance established in the last quarter of 2025, which negates the tax benefit from losses within the U.S. jurisdiction for the current period.
Income tax expense was $2.0 million for the six months ended June 30, 2026, as compared to an income tax benefit of $1.1 million for the six months ended June 30, 2025. The net increase in expense of $3.1 million for the six months ended June 30, 2026, was primarily due to domestic valuation allowance established in the last quarter of 2025, which negates the tax benefit from losses within the U.S. jurisdiction for the current period.